On Pay Gaps and Egalitarianism

Egalitarianism. As we come out of the holiday season — a season of giving, glad tidings, and perhaps even holiday bonuses — I find myself thinking about egalitarianism as we embark on the new year. A new year that provides, as new years often do, the sense that opportunity is in the air. As Calvin said back in 1995 in the final “Calvin and Hobbes” comic, “A New Year, a fresh clean start! A day full of possibilities!”

Egalitarianism originally meant you simply believed in general human equality. Today, as with so many other “isms,” it now connects you with a cause: having a social or governing philosophy advocating for the removal of inequality among people. The term is mostly associated with the French, whose motto, “Liberté, Egalité, Fraternité” (which translates as liberty, equality, fraternity) first appeared during the French Revolution. That motto is now written into their Constitution and is part of their national heritage.

Being an ethnocentric American who has never traveled to France means it would be easy for me to pooh-pooh such a motto, but then I remember my history and that if not for the French we might all be rumor mongering about our monarchy, complaining about our Parliament and singing “God Save the Queen” before our sporting events. I then further remember that the second paragraph of our own Declaration of Independence starts with, “We hold these truths to be self-evident, that all men are created equal…”

In which case, maybe egalitarianism is a good thing. Perhaps treating each other as equals and having every person viewed equally under the law is a reasonable idea. So let’s go with that – that equality and egalitarianism are things for which we should strive.

Which segues to a local example of my thoughts on egalitarianism. Seven weeks ago James Franklin agreed to a 10-year contract as Penn State’s head football coach. His total guaranteed annual compensation during those 10 years is $7 million per year. On top of that he has the opportunity for additional bonuses, such as half-a-million dollars every Dec. 31 just for still being employed. (Pro tip for Coach: if you’re going to quit, quit on Jan. 1!). So let’s just say he’s getting $7.5 million a year. If you divide that income by 365 days, it equals $20,547.94 per day. That’s how much James Franklin earns every day. Not too shabby, huh? 

Let’s compare that to the university at large. Penn State’s Human Resources website lists the pay scales for 16 different “Salary Bands” at Penn State. The minimum pay of the lowest salary band is $16,584, and the maximum pay of the highest salary band is $237,192. Meaning if you are hired at the lowest salary the university pays, coach Franklin makes more money every day than you make in a year. And if you have “maxed-out” so to speak, and are paid the highest salary on this chart, every 12 days coach Franklin makes more money than you make in a year. 

Now, the university does note that these salary bands are “to provide guidelines for staff positions,” and that “there may be business circumstances which require establishment of salaries outside of the guidelines.” So, obviously there are some university employees who make more. But according to these guidelines, coach Franklin makes 31 times more than the maximum salary guideline established by the university. And 452 times more than the lowest. The question I’m asking myself is this: Is making that many multiples more money than others in your company egalitarian?

Before I go any further, I have to apologize to coach Franklin. I’ve used him as an example because he’s local, his compensation is posted online, it was big news and the information is very accessible. I could have spent a few hours digging through the internet and might have found other local examples with similar salary disparities, but his salary was my proverbial “low-hanging fruit.” 

Or I certainly could have easily used other non-local examples. For instance, Apple announced in an SEC filing that CEO Tim Cook’s fiscal 2021 compensation was $98.73 million, which was 1,447 times the median Apple employee’s total compensation of $68,254. Now, Apple did note that $45 million of his compensation was in the form of Apple stock that will vest in October 2023, and that receiving it is tied to Apple’s stock performance (I’m betting he’ll get it!). On the other hand they noted his fiscal 2021 compensation did not include $754 million dollars of stock he was given in 2011 which finally vested last August. That portion alone was almost 11,000 times more than the median Apple employee. 

Or General Motors Co’s CEO, Mary Barra, was given a compensation package worth $23.7 million in their most recent fiscal year, a 9.4% increase from the previous year, and her compensation was about 201 times the median pay for GM employees. It will be interesting to see if that changes in the coming year as it was announced last week that for the first time since 1931 – 90 years – GM did not sell the most vehicles in this country. They were beaten by Toyota, which sold 2.3 million vehicles to GM’s 2.2 million. Not oddly, in Japanese firms, pay packages and the salary gap between a firm’s lowest and highest-paid workers tends to be a fraction of what they are in this country. 

Or I could have used the entertainment industry as an example. Dwayne Johnson is being paid $30 million to star in an Amazon Studios holiday adventure movie titled “Red One” that might be out in 2023. The “regular” employees on such a big-budget film – the makeup artists, camera operators, boom operators, key grip, etc. – will likely have annual incomes around $125,000, meaning “The Rock” is taking home 240 times the pay of the workers who are necessary to make the film. 

Obviously I could go on and on with these examples, and again, the question that all of them beg is, is it egalitarian for a person to make that many multiples more money than others they work with? And the follow-up to that question is, if you don’t think it is egalitarian, what can you do about it? 

Last Tuesday, fellow columnist Joe Battista wrote about how we are all trading our time in return for something, and we should make sure that something is worth our time. In the same vein, we trade our money for things and we should make sure those things reflect our values and beliefs. 

If our egalitarian senses are unhappy, dismayed, offended or otherwise troubled by this sort of largesse, we shouldn’t spend our money with companies or organizations who support that behavior, or on things made by them. In years past, finding such salary information would have been extremely difficult at best. With the internet, it’s easy to do a little homework and see where your money goes and who it supports. And if the CEO of the company you are supporting is making 10, 20 or 100 times or more than the median wage of their employees, maybe that’s not a culture that you find acceptable. Perhaps in the future you will take your money – and your egalitarianism – elsewhere.